NO. 83--219 INTHE SUPREfiE COURTOF THE STATEOFMONTANA 1984

HELEN FOSTERNEEL, Plaintiff andAppellant,

FIRST FEDERALSAVINGSAND LOANASSOC. OF GREATFALLS,a FederalAssoc., Defendantand Respondent.

APPEAL FROM: District Courtof theEighth Judicial District, Inand for the County of Cascade, The Honorable

### E. William Coder, Judgepresiding.

COUNSELOF RECORD: ForAppellant: Regnier & Lewis;StephenD. Robertsargued, Great Falls,Montana

ForRespondent: Dzivi,Conklin & Nybo;E. LeeLeVequeandWilliam Conklinargued, GreatFalls,Montana

Submitted: October 28, 1983 Decided: January 5, 1984

Filed:

### JRN

## 5

# -1984

-- ClerkMr. Justice John Conway Harrison delivered the Opinion of the Court.

This appeal is from the District Court's summary judgment that appellant's homestead declaration is invalid and that the amendments to Section 70-32-104(2),MCA arenot to be retroactively applied. The question posed is whether amendments raising the exemption amount shouldbe applied to debts incurred before the effective date of the amendment, and the constitutionality of such an application. We

reverse. The issues in this caseare:

(1 Was the property description in appellant's homestead declaration sufficient to create avalid homestead exemption? (2) Must the amendment to Section 70-32-104(2), MCA, raising the exemption amount to $40,000 be retroactively applied to all who filed homestead declarations prior to forced sales of their homesteads, without reference towhen the debts were incurred? (3) If the amendment is applied retroactively, does that application violate the Contract Clause of theU.S. and Montana Constitutions? (4 Is a married person entitled to the full homestead exemption on his/her individual interest in the homestead property? The material facts in this case arenot indispute and were stipulated to by theparties in the District Court. On July 25, 1979, appellant and Louise Manzer executed and delivered to respondent a mortgage note to secure a loan used to buy property at 412-422 Fourth Street North inGreat

### Falls,Montana. The loan was secured only by the mortgage to that property, and respondent did not inquire of, or request appellant's personal residencebe used as additional collateral for the loan. Appellant's husband did not participate in obtaining the loan, or sign any of the documents, nor was their personal residence put up as collateral for the loan. On July 21, 1980, appellant and her husband executed and recorded a declaration of homestead, as husband and wife, on their personal residence located at 402 Fifth Avenue North, in Great Falls. The property description on that declaration described the property as, "Lot 1; Block 191; FirstAddition to Great Falls, Montana." (Emphasis added.) The correct legal description of the property is, "Lot 1; Block 191; townor townsite, Great Falls,Montana." (Emphasis added.) As of September 1, 1980, the Ownership Book of Cascade County listed thehomestead declaration with the correct legal description of the property. There is only one Block 191 in the official plat of Great Falls. Respondent's loanofficer who negotiated the loanhad actual knowledge prior to approval of the loan that appellant and her husband owned and occupied as their residence, the property at 402 Fifth AvenueNorth inGreatFalls. A 

### foreclosure action on the mortgage was filed by respondent on October 17, 1980. Judgment was entered in respondent's favor on June 29, 1981, and the mortgaged property was ordered sold. The property was sold for less than the loan amount, and respondent recovered a deficiency judgment in the amount of $44,344.95, plus costs and interest.An execution writ was issued against appellant on September 9,1981, and was levied the following day on her residence at 402 Fifth Avenue North. Proper notice of the sale of appellant's home was given, and on September 28, 1981, respondent filed a "Petition to Appoint Appraisers to Appraise Homestead after Levy of Execution Pursuant to Section 70-32-203,MCA." On October 2, 1981, appellant filed this action seeking a declaratory judgment on the effect of several amendments to the Montana Homestead statutes which became effective October 1, 1981. The amendments increased the exemption amount from $20,000 to $40,000, and allowed the homestead declaration to be filed after judgment had been entered against the declarant. Appellant sought a judgment declaring that the amount of exemptions claimed before the effective date of the amendments, automatically increased to $40,000; and that the amendment allowing adeclarant to file his homestead declaration after judgment has been obtained exempts that homestead from forced sale if the declaration is filed before such forced sale. On October 5, 1981, the District Court granted a stay of the execution proceedings pending adecision on thedeclaratory judgment action. The case was submitted on cross motions for summary judgment and briefs were filed by both parties. In the meantime, appellant filed a new homestead declaration on October 1, 1982, containing a corrected legal description. Judgmentwas entered onMarch 22, 1983,wherein the District Court, per Judge H. William Coder, found appellant's original homestead declaration invalid because of the misdescription, and that the new declaration did not invokethe amendments because the amendment was effective after entry of the deficiency judgment. From this judgment the appeal is taken. The first issue is whether the misdescription of plaintiff's homestead property in the July 21, 1980, declaration of homestead renders the declaration invalid. The validity of a homestead declaration with an incorrector

an inadequate legal description is an issue of first impression in this Court. The respondent relies heavily upon McCarthy v. Kelley (1922), 63 Mont. 233, 206 P. 782, and Yerrick v. Higgins (1899), 22 Mont. 502, 57 P. 95. In McCarthy, supra, the claimant attempted to claim her homestead on an amount of real estate considerably in excess of that allowed by the statue and this Court found the declaration of homesteadvoid. InYerrick, supra,the Court disallowed an exemption on theplaintiff's property in which he attempted to exempt some 2,100 square-feet in excess of the one fourth of an acre allowed by law. That exemption

was not allowed even though the Court acknowledged that the

excess could be taken off the east side of the lot without disturbing any of thedwellings. In each of these cases the reasoning was that the claimants had attempted to exempt more property than was allowed by law. There were no statutory provisions for removing the excess from the claimed amount, therefore it could not be determined which property was being claimed and the declarations were held invalid. In addition respondent cites Esten 

### v. Cheek (9th.Cir.1958), 254 F.2d 667, as a case on all fours with this case. Thatparticular case involved abankruptcywhere the claimant incorrectly described her property as Lot 204,

### Tract 5069, but in her declaration of bankruptcy, she declared homestead property located at Lot 104, Tract 5069. The court in its opinion admitted that the declaration was faulty only as to one point, and otherwise conformed with a11 

### the homestead laws of California. It reversed a bankruptcy judge who had allowed the exemptionholding that

no reformation waspossible. Appellant cites theMontana cases,Oregon Mortgage Co.

v. Dunbar (1930), 87 Mont. 603, 289 P. 559; Williams v. Sorenson (1938), 106 Mont. 122, 75 P.2d 784; and Howe v. Messimer (1929), 84 Mont. 304, 275 P. 281. Dunbar, supra, dealt with a homestead declaration on ten more acres than

were owned by the claimant, but less than the statutory amount. This Court upheld the validity of the homestead, reasoning that the Yerrick and McCarthy rationale did not apply. There could be nomistake as to whatwas claimed by the declarant. We have carefully examined the cases cited above and other cases in the briefs and find that the weight of authority on this issue is on appellant's side. As this Court noted in State v. Lensman (1939), 108 Mont. 118, 88 P.2d 63, "It is not every error in adescription which will invalidate a proceeding or conveyance.'' 108Mont. at 125, 88 P.2d at 

### 66, citing State ex rel. Arthurs 

### v. Board of County Commissioners (1911),44 Mont. 51, 118 P. 804, and Howe, supra. Further, this Court has stated in Williams, supra, that: "A substantial compliance with the statute is sufficient and technical objections will not defeat an exemption claim." 106Mont. at 126, 75P.2d at 786. Ineach of theseMontana cases theCourt looked to the

### purpose of theparticular requirement in determining whether the defect would void the entire declaration. Where the defectwould notwork to the detriment of another party the declaration was upheld. The purpose of including the legal description of the property inhomestead declarations, is to put all the world on notice as towhat property is affected by the declaration. Following the rationale of these prior Montana cases, if the property can be found by the legal description contained on the declaration, then the declaration should be valid. In the present case, the appellant is further aided by the fact that the respondent knew where the property was located and knew it was the subject of the homestead declaration. Combined with the rule that Montana homestead laws will be liberally construed in favor of the claimant, Dunbar, supra, this leads us to hold that the defect does not invalidate the declaration in this case. The second issue raised on appeal is whether the plaintiff's homestead exemption is limited toher exemption rights as of the time she entered into her contract debt with the defendant. Section 70-32-104(2), MCA, as amended October 1,1981,states: "Such homestead, in either case, shall not exceed in value the sum of $40,000. However, inany proceedings instituted to determine the value of such homestead, the assessed value of the land which included appurtenances, if any, and of thedwelling house as appears on the last completed assessment roll preceding the institution of such proceedings shall be prima facie evidence of the value of 

### the property claimed as ahomestead." This section was first enacted in our Civil Code, 1895, and reenacted several times but amended upwards fromthe value of $2,500 in the original act, now to the latest amount $40,000 from the prior $20,000. As noted in the facts, appellant filed her declaration ofhomestead prior to the effective date of the latest amendment. Respondent relies on a long established statutory rule of construction in arguing that the increased homestead exemption amount should not apply to debts contracted prior to October 1, 1981 because such an application would be retroactive in effect. Section 1-2-109, MCA, provides that "no law contained in any of the statutes of Montana is retroactive unless expressly sodeclared." Resolution of this issue involves a two stepprocess. First it must be determined if the proposed application of the amendment would be retroactive in effect. If this is answered in the negative, the application sought is prospective and the inquiryends. If the application sought would be retroactive in effect, then to validate such an application, a legislative intent for it to operate in such



### a manner must exist. See Castles v. State, ex rel. Department of Highways (Mont. 1980), 609 P.2d 1223, 37 St.Rep. 734. Appellant argues first that the application sought isnot retroactiveand second that even if it is, the legislature intended the amendment to be retroactively applied. 

### A retroactive law is one which "[TJakes away or impairs vested rights acquired under existing laws or creates a new obligation, imposes a new duty or attaches a

new disability in respect to transactions already past. " City of Harlemv. State Highway Commission (1967),

### 149Mont. 281 at 284, 425 P.2d 718 at 720. The amendment here being

### considered, increasing the homestead exemption, obviously does not create any new obligations or impose any new duties. Nor does the act making the increased exemption applicable to all debts whenever contracted, constitute a law which "takes away or impairs vested rights acquired under existing contracts." The contract here between the parties in no way involved the plaintiff's homestead. Indeed, the homestead statute itself provided a means by which the respondent First Federal,could have obtained avested right to execute against the appellant s homestead free of any homestead exemption whatsoever under its "existing contract." See, Section 70-32-202(3) and (4), 

### MCA, (pre-amendment) and Section 70-32-202(2) and (3),

### MCA, (post-amendment), which both specifically exclude any homestead exemption for a claimant when the creditor executes on a debt secured by a collateral mortgage on the homestead. Had respondent First Federal by contract made its loan to the appellant contingent upon a collateral mortgage on her homestead, there would be no homestead exemption whatsoever under either pre-amendment or post-amendment Montana homestead law. Here, rather thanbargaining for a collateral mortgage

on Mrs. Neel1shomestead as a condition for the loan and thereby acquiring a vested right under the loan contract, the stipulation of facts presented to the trial court, paragraph 5 

### stated: 

# ".

.. at no time prior to making the loan,did any agent of First Federal ask plaintiff Neel about her residence as collateral for the loan, or state to plaintiff Wee1 that First Federal deemed plaintiff NeelIs residence property at402 Fifth Avenue North, Great Falls, Montana tobe additionalsecurityforthe loan. The loan for the property described in paragraph 2 [the property purchased with the loan] was secured by themortgage tothatpropertyalone." Why thiswas not done aspart of thebargain for her loan is unexplained. Perhaps it was due to the fact, that todo sowould have requiredtheassentand considerationof her husband, John S. Neel, who owned thehomestead property injoint tenancywithplaintiff. Itisclear, however, that by notmaking a collateralmortgageonplaintiff'shomestead property apartof thecontractbargainbetween theparties, the respondent was not required to obtain the husband's approval for the loanorobtainhissignaturesubjectinghis homestead tobe lostiftheloancouldnotberepaid. Thus, without inany way making the appellant's homestead a part of the bargain and without obtaining thehusband's consent, the respondent was able to negotiate a loan for a substantial sum of money to the plaintiff and her partner withtheprospectof receivingan 11% interestreturn. The right which respondent claims was infringed upon when the legislature applied the increased homestead exemptiontoalldebts, evenafterjudgment was entered, was thereforenota rightacquiredunder anexistingcontract. The fact thattherespondent laterobtainedajudgment

on its debt against the plaintiff Neel, moreover, did not magically transform this intoa rightacquiredby contract. See Home Bldg. & Loan Assoc. v. Blaisdell (1934), 290 U.S. 398 at429, 54 S.Ct. 231at236, 78 L.Ed. 413 at424, n. 8; and Stanford v. Coram (1903), 28 Mont. 288, 72 P. 655. As

was stated inStanford, supra, when a claimon a contract is reduced tojudgment, "The contract between the parties isvoluntarily surrendered and canceled by merger in the judgment and ceases to exist. It isno longer looked to for any purpose except asevidence supporting the judgment." 28 Mont. at 292, 72P. at 655. However, the right to execution is a "right acquired under existing laws." We find it unnecessary to determine when this right vested, suffice it to say that the rightdid vest before the effective date of the subject amendments. Laws existing at thedate a contract is executed are asmuch

a part of the contract as if set forth therein. Rieger v. Wilson (1936), 102Mont. 86, 56 P.2d 176. A judgment on a contract does not create a new right, but only, "[Dlefines and determines what rights alreadyexist." Stanford, supra, 28Mont. at 291, 72P. at 655. Since the application sought by appellant would impair rights acquired under existing laws, the proposed application would be retroactive in effect. In Montana law, there exists a presumption against retroactive application of statutes. Dunham v. Southside National Bank (1976),169 Mont. 466, 548 P.2d 1383. For a statute to be retroactively applied, such an intentmust be clearly expressed by the legislature. Section 1-2-209,MCA. The legislative intentmust be gathered from the act itself and no other source. Penrod 

### v. Hoskinson (1976),170Mont. 277, 552P.2d 325. However, "If it is unmistakable that an act was intended to operate retrospectively, that intention is controlling as to the interpretation of the statute, even though it is not expressly so stated." Davidson v. Love (1953), 127Mont. 366 at 370, 264 P.2d 705 at 707.

### Here the legislature entitled the act which increased the homestead exemption from $20,000 to $40,000, "an act to revise the homestead laws; increasing the exemption to $40,000

# ... allowing the exemption to be claimed after a judgment isrecorded." The appellant took advantage of this act, asserted her rights as the law allows her to do and claimed the $40,000 exemption after the judgment recovered by First Federal had been recorded. We find that the legislative intent is clear and allowed the appellant to obtain the benefits of the increased exemption on debts contractedprior to October 1,1981. The respondent contends that there is nothing in the statute, Section 70-32-104, MCA, that expressly declares it retroactive. Therefore since there is a presumption in Montana that statutes operate prospectively only, every reasonable doubt should be resolved against retroactive application. The appellant counters arguing that Section 70-32-104, MCA, clearly indicates in the title of the statute the fact that it is remedial in nature, which requires retroactive application. She further cites to the legislative history of the act which points to the legislative objective behind the amendment; to comply with the Constitutional mandate to "[Elnact liberal homestead and exemption laws.

### " Constitution of the State of Montana, Article XIII, section 5. 

### We are guided by the maxim of lawwhich favors giving protection to thehomestead. In Montana, thehomestead laws

are to be liberally construed in favor of the homestead claimant. Oregon Mortgage Co. v. Dunbar, supra. Under the correct approach, the creditor claiming the homestead is onthe sameplane as other creditors seeking the proceeds of a judicial sale and all creditors are paid according to their respective ranking after payment of cost. The whole theory of the exemption of the homestead is that the obligation of the debtor to those whom he owes the duty to support is a higher obligation than the payment of his debts. The purpose of the framers of the law was to secure a home beyond the reach of financial misfortune, around which gather the affections of the family; the greatest incentive to virtue, honor and industry. Despite the absence of an express declaration, we find that the legislative intent is unmistakable; the amendments are to apply to 

### - all debts whenever contracted. Issue three iswhether the amendments to thehomestead act which increase the homestead exemption from $20,000 to $40,000, and allow the increased exemption to be claimed

even after judgment,violate the Montana and United States Constitutions' contract clauses. The United States Constitution, Article 1 Section 10, 

### cl. 1, in pertinent part reads: "No state shall. 

# . . pass any. 

# .. law impairing the obligation of contracts

# ..." The language contained in Article 11, section 31 Montana Constitution 1972, is substantially the same as the contract clause language of the United States Constitution. This Court has construed the two contract clauses interchangably, relying onUnited States Supreme Court opinions to test the validity of Montana legislationunder both contract clauses,

see e.g., The City of Buttev. Roberts (1933),94Mont. 482, 23 P.2d 342. It is the position of respondent that the act whichallows a homestead-owner, such 

### as appellant to obtain a homestead exemption increased from $20,000 to $40,000, violates the contract clause when invoked against creditors who extended creditor obtained judgmentsprior to the act's effective date. This argument has merit, in that the right to execute

on appellant's homesteadwas acquired prior to the effective date of the amendments. As noted indiscussion of theprior issue it is unnecessary to find at what point the right vested; suffice it to say the vesting predated the amendments as laws existing at the date a contract is executed are asmuch apart of the contract as if set forth therein. Reiger, supra. Early case law supports the respondent's position. See Edwardsv. Kearzey (1877),96U.S. 595, 24L.Ed. 793,and Rieger v. Wilson (1936),102Mont. 86, 56 P.2d 176. While earlier judicial pronouncements lent support to the contentions of respondent, the latest cases 

### of the United States Supreme Court and cases of this Court are to the contrary. See,City of El Pas0v. Simmons (1965), 379 U.S. 497, 85 S.Ct. 577, 13 L.Ed.2d 

### 446. Earlier cases, Reiger, supra,held that if a remedy formerly available to enforce a contract was abrogated or substantially effected by state action, then the contract itself was impaired. Later the Court's decisions began to concern themselves with the fine distinction between the remedyand the obligation. In Simmons, theUnited States Supreme Court summarizes development of the law in this language: "TheCity seeks to bring this casewithin a long line of cases recognizing that distinction between contract obligation and remedy and permitting a modification

### of the remedy as long as there is no substantial impairment of the value of the obligation. (citations omitted)

"Wedonot pause

# .

# . .to chartagain the dividing line under federal law between

'remedy'and 'obligation'.

# .. For it is not every modification of a contractual promise that impairs the obligation of contractunder federal law,anymore than it is every alteration of existing remedies that violates the Contract Clause." (citations omitted)

"The decisions 'put it beyond question that the prohibition is not an absolute one and is not to be read with literal exactness like 

### a mathematical formula,' as Chief Justice Hughes said in Home Building & 

### Loan Assn. v. Blaisdell, 290 U.S. 389, 428. The Blaisdell opinion, which amounted to a comprehensive restatement of the principles underlying the application of the Contract Clause, makes it quite clear that 

### '[nlotonly is the constitutional provision qualifiedby the measure of control which the State retains over remedialprocesses, but the State also continues topossess authority to safeguard the vital interests of its people. It does not matter that legislation appropriate to that end "has the result of modifying or abrogating contracts already in effect." (citations omitted) Not only are existing laws read into contracts in order to fix obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order 

# . . 

# . . This principle of harmonizing the constitutional prohibition with the necessary residuum of state power has had the progressive recognition in the decisions of this Court.'(citations omitted) Moreover, the

'economic interests of the State may justify the exercise of its continuing and dominant protective power notwithstanding interference with contracts.' (citations omitted) The State has the 'sovereign right. 

# .. to protect the. 

# . . general welfare of the people 

# . . . . Once we are in this domain of the reserve power of aStatewe must respect the "wide discretion on thepart of the legislature in determining what is and what is not necessary."'

(citations omitted) As Mr. Justice Johnson said in Ogden v. Saunders, 

## '[i]t is the motive, the policy, the object, that must characterize the legislative act, to affect it with imputation of violating the obligation of contracts.' 12Wheat. 213, 291. "Of course, the power of a State to modify or affect the obligation of contract is not without limit. [Wlhatever is reserved of state power must be consistent with the fair intent of the constitutional limitation of that power. The reserved power cannot be construed so as to destroy the limitation, nor is the limitation to be construed to destroy the reserved power in its essential aspects. They must be construed 

### in harmony with each other. This principle precludes a construction which would permit the State to adopt as its policy the repudiation of debts or the destruction of contracts or the denial of means to enforce them.' Blaisdell, supra at 439." 379 U.S at 503-9, 85 S.Ct. 581-4, 13L.Ed.2d 451-5. Following this reasoning is Hooter v. Wilson (Louisiana1973), 273 So.2d 516,where the Supreme Court of Louisiana noted:

"When the state changed the remedy by increasing the exemption, it did not abrogate the remedy; it did not make the remedy any less certain than it was at the time of contract; it simply in the interest of the public welfare increased the debtor's exemption so thathe and his family might be saved frombeing a charge upon the state." 273 So.2d at 522. In Ouachita National Bank v. Rowan (- 1977), 

## La.App. 345 So.2d 1014,again the Louisiana court reasoned: "The homestead exemption was not a new creation of the 1974 Constitution but was a continuation and amere modification or increase of the existing exemption. We have found that the modification (or increase) does not impair the contracts at issue 

# . . 

# . but even should our findingsbe otherwise,we alsowould find

### 'the economic interest of the state. 

# .



# .[to] justify the exercise of its continuing dominant protective power notwithstanding interference with contracts.' (citations omitted) The resultheredoesnot repudiate the I.

# . . debts or destruction of contracts

# ... or [deny the Bank the] the [sic]means to enforce them.'" 345So.2d at 1018. Our holding does not do violence to the holdings of the cases referred to by respondent under the respective factual circumstances there present. Those cases were not decided under similar circumstances or in light of the authority presentedhere. It is to be noted that the respondent in relying on Kearzey, supra, and Rieger, supra,asbeing the law, failed to discuss the most recent United States Supreme Court Opinion on the contract clause,Energy ReservesGroup, Inc.,

v. Kansas Power and Light Co. (1983) U.S. - --? 

### 103

The Supreme Court in EnergyReserves, noted that an examination of the legislation for validity under the contract clause requires a three step analysis. The threshold inquiry is "whether the state law has, in fact, operated as a 

### substantial impairment of the contractual relationship.I' U.S. at 

## , 103 S.Ct. at 704-5, 74 L.Ed.2d 569; 

### citing Allied Structural Steel Co. v. (1978), 438 U.S. 234 at 244, 98 S.Ct. 2716 at 2722, 57 E.Ed.2d 727. If there is no substantial impairment of the contractual relationship, the inquiry is ended. Second, if the legislation substantially impairs the contractual rights, "

### [t] he sta,te, in justification, must have a 

### significant and legitimate public purpose behind the regulation." U.S. at 

## , 103 S.Ct. at 705, 74

### L.Ed.2d 569;citingU.S. TrustCo. 

### v. New Jersey (1977),431 U.S. 1 at 21, 97S.Ct. 1505 at 1518, 52L.Ed.2d 92. Third, the adjustmentof rightsand responsibilitiesof contracting parties must be based 

### "[ulponreasonable conditions" and be "[olf a character appropriate to the public purpose justifying the legislation's adoption." U.S. at I 

### 103 S.Ct. at 705, 74 L.Ed.2d 569. As the opinion notes, unless the State is a party to the contract, courts will properly defer to legislative judgment on this third step. Since the State is not 

### aparty to this contractwe will not question the propriety of this legislation, thus we are faced with a twopart inquiryon the factspresented. Energy ReservesGroup, supra, set forth criteria for making the threshold determination on substantial impairment. Total destruction of contractual expectations isnot necessary, and a lawwhich restrictsaparty togains reasonably expected from a contract is not 

### a substantial impairment. Further, the extent theparticular industryhas been regulated in the past will mollify the amount of impairment, if any. We find that the act as applied in the manner proposed by appellant does not operate as substantial impairmentof theparties contractual relationship. In this case, the area in dispute had been heavily regulated in the past. Indeed there has been a homestead exemption law literally before Montana became 

### a state. See Section 194, page 81, Bannack Statutes; Section 1-9, page 77-79, (1869). "When he [respondent] purchased into an enterprise already regulated in the particular to which he

now objects, he purchased subject to further legislation upon the same topic." Energy ReservesGroup, supra,U.S. at 

## ,103 S.Ct. at 705, 74 L.Ed.2d 569, citing Viex

v. SixthWard Building and Loan Association (1940), 310U.S. 32 at 38, 60 S.Ct. 792 at 794-5, 84 L.Ed. 1061. Here respondent made its loan to the appellant and Louise Manzer subject to further legislation on homestead exemptions. Respondent's execution rights are granted by law, independent of its remedies provided in the contract. "Parties appealing to the law can take only what the law awards them." Stanford v. Coram (1903), 28 Mont. 288 at 292, 72

### P. 655at 655. The respondent should have been well aware that the homestead exemption had been increased regularly over the past fifty years, and knew that appellant's residence would be subject to homestead exemption, therefore took its chances that the State might increase it. See, United States v. Smith (E.D. Louisiana 1980) 486 F.Supp. 76at 78. In addition, Montana's act allowed the increased exemption to be claimed after judgment, which simply restricted respondent to gains reasonably expected from its contract. Because the loanwas not secured by a collateral mortgage on the homestead, respondent, at the time of the loan, could not reasonably have relied upon appellant's continued ownership of the homestead property to the time of execution and judgment. Hooter v. Wilson (Louisiana1973), 273 So.2d 516 at 522. Here respondent did not question appellant abouther residence as collateral for the loan,or state that it deemed her residential property to be additional security. Rather than being a "central undertaking" of the parties in the loan agreement, the continued existence of appellant's interest inher homestead

### property at the time of execution by the respondent was no

more than an unbargained for windfall. In short the creditor's reasonable expectations were not impaired by the state act. We therefore find that the act increasing the homestead exemption and allowing claimants to claim the increased $40,000 exemption applies to all debts, whenever contracted, regardless of whether those debts were already reduced to judgment. This interpretation is reasonable and necessary to insure an adequate homestead exemption to the people of Montana and applies to the case at bar. Even if the amendment had operated as a "substantial impairment"of the parties contractual relationship, it would be valid under the second step of the contract clause analysis. In the instant case, we must attempt to reconcile the strictures of the contract clause with the "essential attributes of sovereign power.

# .. necessarily reserved to the states to safeguard the welfare of their citizens." U.S. Trust Co. v. New Jersey (1977),431 U.S. 1 at 21, 97 S.Ct. 1505 at 1518, 52 L.Ed. 2d 92. Without this legislation, a vast class of debts contracted prior to October 1, 1981, would be immune from this remedial legislation, and a large class of citizens would therefore continue to suffer under the onus of an inadequate $20,000 exemption which the legislature feltdid not meet the times

or our Constitution. Issue four is whether appellant is entitled to the full $40,000 homestead exemption on the equity in her undivided one-half interest in her homestead propery. Appellant argues that an undivided interest is entitled to

### the entire homestead exemption instead of an amount proportional to her interest as suggested by respondent. The gist of the respondent's argument is that the homestead exemption applies to property as a whole, there being only

one exemption. Thuswhen an owner of an undivided interest inproperty claims an exemption,he or she is limited to the exemption amount proportional to his or her undivided interest. In support thereof, respondent cites anumber of California cases, inparticular italleges ascontrolling an appellate court decision,Application of Rauer's Collection (1948),87Cal.App.2d 248,196P.2d 803. We note that since theRauer's opinion,decisions of the California courts have refused to follow the holding in that case, thus it is not good authority for respondent's position. See, Schoenfeld

v. Norberg (1970), 11 Cal.App.3d. 755, 90 Cal.Rep. 47; Strangman v. Duke (1956), 140 Cal.App.2d 185, 295 P.2d 12. In Strangman, supra, the California Court noted, "There is

no provision in our statute for the apportionment of an exemption in any situation." 

### InMontanawe likewise have no suchprovision. The Strangmandecision, supra,held that if

one spouse's creditors move against his/her undivided interest in the homestead property held in joint tenancy, that the spouse gets the benefit of the entire exemption. Finding the California decisions irreconcilable,we believe the holding in Strangman, supra, is preferable and is in accordwith Montana law. Section 70-32-103 MCA, provides from whose property the homesteadmay be selected. If the claimant ismarried, the homestead may be selected from property of either spouse. In addition to our statute, this Court has heldseveral times that a homestead may be claimed on an undivided interest inthe land. SeeWall 

### v. Duggan (1926), 76 Mont. 239, 245 P. 953; Esterly v. The Broadway Garage Co., etal. (1930), 87 Mont. 64, 285 P. 172; DeFontenay

### v. Childs (1933), 93 Mont. 480, 19 P.2d 650; Isom v. Larson (1927), 78 Mont. 395, 255 P. 1049. In Lindley v. Davis (1887), 7 Mont. 206, 14 P. 717 this Court held that a tenant-in-common 

### is entitled to the full homestead exemption. In addition, as previously noted in this opinion, strongpolicyconsiderationsexistwhich mandate thateither debtor/spouse be entitled to the full $40,000 homestead exemption on his or her undivided half interest in the property. In Montana, homestead laws are to be liberally construed infavor of the claimant. OregonMortgageCo. v. Dunbar, supra. We therefore find thatappellantisentitled to the full $40,000 homestead exemption on her undivided one-half interest inthehomestead property. Thejudgment of theDistrictCourtisreversed and the

case is remanded for further proceedings in compliance with thisopinion.

Weconcur: 

# %4 J,% 

# 4 Chief Justice